The Promise And Peril Of Ethereum

bitcoin vs ethereum

In a sense, Bitcoin was an attempt to democratise money, and it’s no coincidence that the first coin came out in 2009, just a year after the credit crunch. With $825B market cap, Bitcoin is the biggest crypto on the block. But with a market cap of $204 billion, it won’t be stealing the top spot any time soon. While crypto assets in general are not a safe investment, Bitcoin may has less risk than Ethereum because it has more demand and has a long track record. However Ethereum may have more potential growth over the long time. According to industry experts, Ethereum is a more utility-based cryptocurrency having qualities to support smart contracts.

Bitcoin is still the most dominant asset in the crypto space, and by quite a distance. Bitcoin might not promise big returns in the immediate future, but it’s the kind of investment that you’d still want in your portfolio in 10 or maybe 20 years. Adam Cochran is a crypto analyst and former marketing director of Dogecoin.

So, while not currencies in the strict sense – they are certainly assets, as they hold value and can be sold for dollars, pounds and euros. Much like gold – which not everyone will accept in trade, but everyone agrees has a value. Last year, bitcoin vs ethereum thanks to stratospheric rises in value, lots of people became aware of the existence of Bitcoin, as well as another often-cited up-and-coming cryptocurrency, Ethereum. 67% of retail clients lose money when trading CFDs with this provider.

Buy a large selection of cryptocurrencies instantly via credit card or bank account after registering. Store your crypto conveniently in Kriptomat’s multi-currency wallet. For example, a system called Rootstock is being developed as an “attachment” for the Bitcoin blockchain, which allows smart contract operations to occur off-chain.

One price prediction model, which proved remarkably accurate in August and September, puts bitcoin on track to hit six figures before Christmas, though there are some caveats. The overall crypto market is now valued at nearly $2.2 trillion – up more than 15 per cent since the start of October. The cryptocurrency reached above $55,000 on Wednesday, with the latest price gains coming after bitcoin briefly fell below $30,000 at the end of July. Bitcoin is now less than $10,000 away from the all-time price high it experienced in mid April. Put it this way, you wouldn’t use cryptocurrency to pay for your food shop. In the UK, no major high street shop accepts cryptocurrency as payment.

bitcoin vs ethereum

Bitcoin has more credibility among and DIY professional investors due to its age. With over a decade as the leading cryptocurrency, it is regarded as more stable and likely to stick ethereum cryptocurrency around longer than some of its new rivals, rather than a speculative bet on which the next hot altcoin will be. These are the biggest altcoins cryptocurrency fans should know about.

Like other cryptocurrencies, its price has rallied significantly in the past year. Its price has risen 43pc in the past month and 1,300pc over 12 months. One Ether costs $3,500 (£2,500) and can be bought and sold on the major crypto exchanges, including eToro and Coinbase. Ethereum’s “currency” is called Ether, which like other cryptocurrencies is “mined” by solving equations to validate new transactions on the network. Transactions can be processed more quickly and efficiently than with Bitcoin.

As far as the trading of both assets is concerned, at CEX.IO we observed that in December 2020 ETH/USD trading volumes grew by 20%, while BTC/USD grew by 47.5%. We believe that it may represent a psychological trait for users – due to the rally, BTC became too “expensive” to fund trading strategies with, too risky to trade. This also indicates that Ethereum is no longer following Bitcoin’s price fluctuations as closely as it used to.

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Understanding the similarities and differences between these two giants is key to a wider understanding and appreciation of cryptocurrency technology. Additional Key Information Documents are available in our trading platform. Similarly, Ethereum 2.0 does not introduce a new cryptocurrency or coin that will replace your current Ether. The Ethereum network has grown exponentially in recent years, and to reduce pressure on the blockchain and nodes, Ethereum 2.0 will introduce 64 additional chains via sharding.

Will ethereum go up in 2021?

Ether has already climbed more than 400% in 2021, and some experts say it could be headed toward $4,000 as it benefits from increased transactions and a spike in NFT purchases on the Ethereum blockchain.

It launched in 2009 but didn’t really get going until the late 2010s. To make sure the site is relevant to you, we need to know if you’re an individual investor or a financial professional. If you’re still getting up to speed on the cryptocurrency space, you’ve probably heard of Ethereum, which ranks as the second-largest cryptocurrency after Bitcoin (new to bitcoin? Read this first). This article will explain some of the basics of the Ethereum protocol – I’ll discuss Ether as an investment asset in my next article.

What Is Ethereum?

Over the decade, the cryptocurrency has moved from a transactional token to a store of value for many investors due to its “tried and tested” track record. Bitcoin’s strongest advantage over Ether as an investment lies with scarcity. This gives the coin strong fundamentals from a supply and demand point of view, and led to some likening it to “digital gold”. The profitability of the two mining options is difficult to compare, as too many variables come into play.

bitcoin vs ethereum

Most decentralised applications have a native cryptocurrency token, so Ethereum has facilitated a significant proportion of the cryptocurrency market that we see today. In 2020, Ethereum began the transition from proof-of-work mining to proof-of-stake to drastically speed up the network and reduce its carbon footprint. Bitcoin’s scarcity, positive price movement over the past decade, and strong reputation serve as the main arguments for it being a store of value – despite the large volatility in day-to-day prices.

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Without going too far from the topic of Ethereum 2.0, it makes sense to mention Beacon chain., that is used to provide an upgrade to Ethereum’s features. Beacon chain makes use of a proof-of-stake consensus algorithm rather than proof-of-work – this means that it uses tokens instead of traditional computational power in order to process transactions. One of Ethereum’s major upgrades includes a shift to the proof of stake mechanism.

Less than a year ago, one dogecoin was worth just two tenths of a cent and its market cap was less than a quarter of a billion dollars. The sometimes extreme transaction fees required to use ethereum are a long-standing problem. You create an account with the chosen provider confirming your place of residence and identity and then link to your bank account in order to buy the currency.

  • Analysts believe that the competition is between Bitcoin and Ethereum.
  • While the cryptocurrency’s market cap stood at around $946.08 billion or £693.45bn on 23 August, it had fallen to 801.92bn on Friday morning.
  • All cryptocurrencies are risky investments, but by doing your research and thinking about how much speculation you’re comfortable with, it will be easier to decide which option is best for you.
  • Any commentary provided is the opinion of the author and should not be considered a personalised recommendation.
  • The UK Gambling Commission has also acknowledged the increasing popularity of cryptocurrencies and has offered several licences to sites offering the option.

While Bitcoin uses a proof-of-work mining protocol, Ethereum is moving to a proof-of-stake network. Some of the best-known applications are decentralized finance and non-fungible tokens , but because Ethereum is an open-source technology, anyone can create new applications, and crypto exchanger the opportunities are endless. In fact, Bitcoin uses more electricity than the entire country of the Philippines, according to data from the University of Cambridge. There will only ever be 21 million tokens in existence, and that scarcity could potentially drive up its value.

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Ethereum Flippening underway He also backs this view up with the valid reasoning that the likelihood of demand for Ethereum outpacing demand for Bitcoin seems logical over time. That’s because, as a use case, Bitcoin is seen as a store of value, while Ethereum is primarily bought to generate a return on investment. This shows investors need to be prepared to HODL if they stand a chance of making a return on their investment. Smart contracts are essentially collections of code that perform a set of instructions while operating on the blockchain. They are popular because they are efficient, trusted, and cost-effective. A key metric for estimating price movements is the supply of bitcoin held by long-term holders.

How far will bitcoin go up?

Because Bitcoin is so powerful and has so much potential, Bitcoin's projected value and estimated growth could be astronomical. Speculation from crypto analysts and industry experts suggests that Bitcoin's long term value could reach over $100,000 to as much as one million dollars per BTC in the future.

In the time between Bitcoin and Ethereum’s release, lots of other cryptocurrencies emerged. Mostly, however, they were limited to trying to improve on aspects of Bitcoin’s performance – for example, increasing speed of transactions or improving the security or anonymity of transactions. So, starting with the basics – cryptocurrency is a term that has come to be used to identify a newly emerging asset class. In some ways it is a slight misnomer – currencies are stores of value which we can use to purchase goods or services, and most cryptocurrencies cannot yet be exchanged for anything, other than other cryptocurrencies.

This proof of work energy consumption, in the midst of a climate crisis, was cited by Elon Musk as the reason Tesla stopped accepting bitcoin as payment for its cars. For many investors, Ethereum’s real value is not tied to its scarcity or its current applications. Instead, Ethereum’s present value is intrinsically linked to its potential to revolutionise the digital space and the way we do business. Ethereum smart contracts could change everything from mortgage transfers to the way we create and consume online content. Moreover, the most exciting future applications of Ethereum will probably be the ones that we haven’t even though of yet.

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Ethereum is the second-largest cryptocurrency by market cap, with a total value of £273.43 in July 2021. But with more than 9,000 crypto projects live today, retail investors are now starting to see if there is more value in buying one of the many alternatives to bitcoin. Associate Editor at Forbes Advisor UK, Andrew Michael is an award-winning financial journalist with a special interest in investment and the stock market. Combined with three decades as a journalist and hosting industry events from roundtables and masterclasses to awards ceremonies, Andrew’s contacts book is enormous. This can be done through a crypto exchange such as Coinbase or via online platforms such as Gemini , Kraken or eToro.

bitcoin vs ethereum

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Cryptocurrencies already use a process called forks to update and protect against weaknesses. In theory, post-quantum encryption security could be applied, via a fork, in time to outwit any threat.

Goldman Sachs analysts recently proclaimed that Ethereum is poised to overtake bitcoin at the top of the crypto food chain. Alternatively, you can stake your Ethereum on Kraken and Redot starting from 0,1 ETH. Validators can commit their funds to the blockchain starting at genesis. Even though it has certain downfalls, it gained a significant user base and became the second most popular coin. Cryptocurrencies have revolutionised the way transactions are done in the modern world. Blockchain technology is permeating many industries, including healthcare, agriculture, and banking.

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There is no central bank or government to manage the system or step in if something goes wrong. Cryptoassets are generally held as investments by people who expect their value to rise. It was set up to try to save investors time so they don’t have to manage their positions themselves. Launched a year ago, Harvest Finance automatically moves money around the decentralised finance system to try to generate high yields from cryptocurrencies. While it looks likely that it could be around for some time, not everyone is sold on on the new cryptocurrency. Demand for space on the network is still low and it’s development teams is still much smaller than that of Ethereum.

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Comments such as these, however, fail to put off millions of aficionados around the world from trying to make money from cryptocurrencies. If your financial plans revolve around capital preservation – hanging onto what you’ve got – then the volatile behaviour of cryptocurrencies is most definitely not for you. Nowadays, they pre-occupy the thoughts of governments and major financial institutions alike and divide opinion as starkly as the taste of Marmite. You don’t need to follow the financial world that closely to know that cryptocurrencies have become one of its biggest stories in recent years.

Author: Steve Goldstein

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